Balaxi Ventures Limited (NSEI:BALAXI), a INR₹45.14M small-cap, is a capital market firm operating in an industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Financial services analysts are forecasting for the entire industry, negative growth in the upcoming year . Today, I will analyse the industry outlook, and also determine whether Balaxi Ventures is a laggard or leader relative to its financial sector peers. View our latest analysis for Balaxi Ventures
What’s the catalyst for Balaxi Ventures’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth in the twenties, beating the Indian market growth of 12.84%. Balaxi Ventures lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its capital markets peers. As the company trails the rest of the industry in terms of growth, Balaxi Ventures may also be a cheaper stock relative to its peers.
Is Balaxi Ventures and the sector relatively cheap?
The capital markets industry is trading at a PE ratio of 28x, relatively similar to the rest of the Indian stock market PE of 29x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 6.04% compared to the market’s 9.78%, potentially indicative of past headwinds. Since Balaxi Ventures’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Balaxi Ventures’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Balaxi Ventures has been a capital markets industry laggard in the past year. If your initial investment thesis is around the growth prospects of Balaxi Ventures, there are other capital markets companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Balaxi Ventures fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Balaxi Ventures has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its capital markets peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Balaxi Ventures’s future cash flows in order to assess whether the stock is trading at a reasonable price.